Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed Income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per income tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 21 - 22
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹31.6104
↑ 0.01 ₹813 1.2 3.4 5.5 9.6 8 8.1 Nippon India Ultra Short Duration Fund Growth ₹3,224.47
↑ 0.21 ₹2,872 0.3 0.9 5.6 8.1 4.8 5.4 UTI Ultra Short Term Fund Growth ₹3,410.51
↓ -0.12 ₹1,933 1.8 3.6 4.4 6.3 5.2 5.8 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 22 Oct 21
To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments. Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan Returns up to 1 year are on (Erstwhile Reliance Liquid Fund - Cash Plan) The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments. Nippon India Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 7 Dec 01. It is a fund with Low risk and has given a Below is the key information for Nippon India Ultra Short Duration Fund Returns up to 1 year are on (Erstwhile UTI - Floating Rate Fund - Short Term Plan) To generate regular income through investment in a portfolio comprising substantially of floating rate debt / money market instruments, fixed rate debt / money market instruments swapped for floating rate returns. The Scheme may also invest a portion of its net assets in fixed rate debt securities and money market instruments .However there can be no assurance that the investment objective of the Scheme will be achieved. The Scheme does not guarantee / indicate any returns. UTI Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 29 Aug 03. It is a fund with Moderately Low risk and has given a Below is the key information for UTI Ultra Short Term Fund Returns up to 1 year are on 1. Franklin India Ultra Short Bond Fund - Super Institutional Plan
CAGR/Annualized return of 8.7% since its launch. Return for 2020 was 4% , 2019 was 9.6% and 2018 was 8.7% . Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth Launch Date 18 Dec 07 NAV (22 Oct 21) ₹31.6104 ↑ 0.01 (0.03 %) Net Assets (Cr) ₹813 on 30 Sep 21 Category Debt - Ultrashort Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆ Risk Moderate Expense Ratio 0.52 Sharpe Ratio 3.37 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 0% Effective Maturity 11 Months 12 Days Modified Duration Growth of 10,000 investment over the years.
Date Value 30 Sep 16 ₹10,000 30 Sep 17 ₹10,881 30 Sep 18 ₹11,701 30 Sep 19 ₹12,877 30 Sep 20 ₹13,455 30 Sep 21 ₹14,714
Purchase not allowed Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Oct 21 Duration Returns 1 Month 1.2% 3 Month 3.4% 6 Month 5.5% 1 Year 9.6% 3 Year 8% 5 Year 8.1% 10 Year 15 Year Since launch 8.7% Historical performance (Yearly) on absolute basis
Year Returns 2020 4% 2019 9.6% 2018 8.7% 2017 8.2% 2016 9.7% 2015 9.7% 2014 10% 2013 10% 2012 10.3% 2011 9.4% Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
Name Since Tenure Santosh Kamath 25 Oct 18 2.85 Yr. Pallab Roy 1 Jun 08 13.26 Yr. Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 30 Sep 21
Asset Allocation
Asset Class Value Cash 47.28% Debt 52.72% Debt Sector Allocation
Sector Value Corporate 52.72% Cash Equivalent 47.28% Credit Quality
Rating Value A 59.12% AA 40.88% Top Securities Holdings / Portfolio
Name Holding Value Quantity Edelweiss Commodities Services Limited
Debentures | -39% ₹317 Cr 3,194 Clix Capital Services Private Limited
Debentures | -28% ₹226 Cr 2,350 Clix Capital Services Private Limited
Debentures | -24% ₹193 Cr 2,000 SBI Overnight Fund Dir Gr
Investment Fund | -1% ₹10 Cr 27,965
↓ -1,215,109 Edelweiss Agri Value Chain Limited
Debentures | -1% ₹4 Cr 70 Tata Motors Limited
Debentures | -0% ₹3 Cr 34 JM Financial Credit Solutions Limited
Debentures | -0% ₹3 Cr 28
↓ -18 Call, Cash & Other Assets
CBLO | -6% ₹52 Cr 2. Nippon India Ultra Short Duration Fund
CAGR/Annualized return of 6.1% since its launch. Ranked 62 in Ultrashort Bond category. Return for 2020 was 4.9% , 2019 was 0.9% and 2018 was 7.3% . Nippon India Ultra Short Duration Fund
Growth Launch Date 7 Dec 01 NAV (22 Oct 21) ₹3,224.47 ↑ 0.21 (0.01 %) Net Assets (Cr) ₹2,872 on 30 Sep 21 Category Debt - Ultrashort Bond AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Low Expense Ratio 1.09 Sharpe Ratio 1.86 Information Ratio 0 Alpha Ratio 0 Min Investment 100 Min SIP Investment 100 Exit Load NIL Yield to Maturity 4.89% Effective Maturity 7 Months 8 Days Modified Duration 5 Months 15 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 16 ₹10,000 30 Sep 17 ₹10,581 30 Sep 18 ₹11,264 30 Sep 19 ₹11,397 30 Sep 20 ₹11,989 30 Sep 21 ₹13,010 Returns for Nippon India Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Oct 21 Duration Returns 1 Month 0.3% 3 Month 0.9% 6 Month 5.6% 1 Year 8.1% 3 Year 4.8% 5 Year 5.4% 10 Year 15 Year Since launch 6.1% Historical performance (Yearly) on absolute basis
Year Returns 2020 4.9% 2019 0.9% 2018 7.3% 2017 5.8% 2016 6.8% 2015 7.6% 2014 8.4% 2013 8.5% 2012 9.2% 2011 9% Fund Manager information for Nippon India Ultra Short Duration Fund
Name Since Tenure Vivek Sharma 1 Oct 13 7.92 Yr. Kinjal Desai 25 May 18 3.27 Yr. Data below for Nippon India Ultra Short Duration Fund as on 30 Sep 21
Asset Allocation
Asset Class Value Cash 60.6% Debt 39.4% Debt Sector Allocation
Sector Value Cash Equivalent 56.38% Corporate 29.85% Government 13.77% Credit Quality
Rating Value A 0.57% AA 17.02% AAA 82.41% Top Securities Holdings / Portfolio
Name Holding Value Quantity 182 DTB 02122021
Sovereign Bonds | -5% ₹194 Cr 19,500,000 8.79% Govt Stock 2021
Sovereign Bonds | -3% ₹101 Cr 10,000,000 National Bank For Agriculture And Rural Development
Debentures | -3% ₹100 Cr 1,000 India Grid Trust
Debentures | -2% ₹81 Cr 700
↑ 700 Telesonic Networks Limited
Debentures | -2% ₹75 Cr 750 8.35% Govt Stock 2022
Sovereign Bonds | -2% ₹72 Cr 7,000,000 8.75% Kerala SDL 2022
Sovereign Bonds | -2% ₹61 Cr 5,950,000 Embassy Office Parks Reit
Debentures | -2% ₹58 Cr 464 Shriram Transport Finance Company Limited
Debentures | -2% ₹56 Cr 550 Piramal Capital & Housing Finance Limited
Debentures | -2% ₹55 Cr 675 3. UTI Ultra Short Term Fund
CAGR/Annualized return of 7% since its launch. Ranked 27 in Ultrashort Bond category. Return for 2020 was 5.3% , 2019 was 3.3% and 2018 was 7% . UTI Ultra Short Term Fund
Growth Launch Date 29 Aug 03 NAV (22 Oct 21) ₹3,410.51 ↓ -0.12 (0.00 %) Net Assets (Cr) ₹1,933 on 30 Sep 21 Category Debt - Ultrashort Bond AMC UTI Asset Management Company Ltd Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.96 Sharpe Ratio 1.09 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 2,500 Exit Load NIL Yield to Maturity 4.1% Effective Maturity 5 Months 16 Days Modified Duration 4 Months 22 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 16 ₹10,000 30 Sep 17 ₹10,724 30 Sep 18 ₹11,391 30 Sep 19 ₹11,816 30 Sep 20 ₹12,494 30 Sep 21 ₹13,296 Returns for UTI Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Oct 21 Duration Returns 1 Month 1.8% 3 Month 3.6% 6 Month 4.4% 1 Year 6.3% 3 Year 5.2% 5 Year 5.8% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2020 5.3% 2019 3.3% 2018 7% 2017 6.6% 2016 8.9% 2015 8.5% 2014 8.8% 2013 9.8% 2012 9% 2011 8.2% Fund Manager information for UTI Ultra Short Term Fund
Name Since Tenure Sudhir Agarwal 1 Jul 15 6.18 Yr. Ritesh Nambiar 1 Jul 15 6.18 Yr. Data below for UTI Ultra Short Term Fund as on 30 Sep 21
Asset Allocation
Asset Class Value Cash 57.56% Debt 42.44% Debt Sector Allocation
Sector Value Cash Equivalent 53.17% Corporate 25.41% Government 21.42% Credit Quality
Rating Value AA 13.94% AAA 86.06% Top Securities Holdings / Portfolio
Name Holding Value Quantity 182 DTB 23122021
Sovereign Bonds | -6% ₹129 Cr 1,300,000,000 8.20% Govt Stock 2022
Sovereign Bonds | -5% ₹114 Cr 1,115,000,000 182 DTB 12112021
Sovereign Bonds | -4% ₹99 Cr 1,000,000,000 182 DTB 16122021
Sovereign Bonds | -4% ₹99 Cr 1,000,000,000 182 DTB 25112021
Sovereign Bonds | -3% ₹75 Cr 750,000,000 Hindalco Industries Limited
Debentures | -3% ₹67 Cr 650
↓ -100 National Bank For Agriculture and Rural Development
Debentures | -2% ₹51 Cr 500
↑ 500 Reliance Industries Limited
Debentures | -2% ₹51 Cr 500 Housing Development Finance Corporation Limited
Debentures | -2% ₹50 Cr 500 182 DTB 14102021
Sovereign Bonds | -2% ₹50 Cr 500,000,000
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